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Rachman

It's Buyers Paying Too Much, Not Sellers...

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I have taken a look at a couple of bungalows to do up and resell - usual story, right place for retirees, current residents gone into homes, totally out of date and need a complete revamp. I don't think BTL is worth it at the moment - too much added risk to my assets - rather, in, do up and out.

Done I thought they were worth £160-165K each. EA agrees they will sell at that all day long but pushing for £170K is a bridge too far.

So if you need to spend £15Kish on each of them, and you need a 15-20% margin in them to hedge against failure and unforeseen problems (the usual basic builder's model), you need to be buying them at about £120K.

EA agrees (he would). Someone is happy to pay £140K for one of them as is - you just can't do it for that and you can't be making any money - the buyer, you guessed it, someone who thinks they can buy it, do it up for £5K (it needs CH, replastering, rewiring, new kitchen, bathroom and most of a reroof as well as total refit) and rent it out...... it's his pension - rental is tops £575 clear (more like £550). at a 4% yield, he's not washing its interest only face and relying on capital growth to ameliorate what he's losing on his equity invested. Which is fine if they are going up in price, but EA is telling me it's been 'stagnant' for 18 months - good stuff is selling but at a level and no-one will push it beyond it and there's an awful lot of people who are sitting tight. How can the numbers add up unless someone is expecting large capital growth to take out his short term losses..... ? This is relatively new to me - the supply of houses to do had usually been steady and they were easy to pick up, the last year it's been taken over by people willing to overpay and oblivious to risk - in effect, sticking it all on black by going bigger into the red.

He also commented that there is little supply as all of the cheaper houses that could and would have been sold when elderly people die is being kept by their kids and rented out..... - the sellers of the other one (the kids) are insistent it's worth £160K because it's clean (it is, but it's also straight out of 1978) - they have been trying to sell for 3 months with no buyers at their asking price...... - well no, that's because the numbers don't stack up - I was told in no uncertain terms if it does not get £160K they will keep it and rent it out for £600 a month....... - er no, it's not going to rent at all as it's in a timewarp.

utterly financial nonsense, the gambling that people are doing is crackers - FYI, the two full time property developers I know are out of buying their own properties at the moment, they are simply contracting out their workmen to other people's 'investments'.

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Our builder has been trying to get into property developing (in Surrey) and he says it is frenzied, with people fighting over run down places at auction, going for ridiculous prices that can't be economic.

The problem is we have had years of Sarah Beeny programmes showing complete idiots make a fortune out of property by just being in the market at the right time. The worse their developments, the better, because they have hung onto them for longer in a rising market.

Now everyone thinks that they can make easy thousands. When the professionals are priced out of business, you know the market has lost its head.

Edited by bearwithaconscience

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Our builder has been trying to get into property developing (in Surrey) and he says it is frenzied, with people fighting over run down places at auction, going for ridiculous prices that can't be economic.

The problem is we have had years of Sarah Beeny programmes showing complete idiots make a fortune out of property by just being in the market at the right time. The worse their developments, the better, because they have hung onto them for longer in a rising market.

Now everyone thinks that they can make easy thousands. When the professionals are priced out of business, you know the market has lost its head.

I think you are right, the media are really to blame for all this, "get rich schemes", but when all this blows over and there is a "house price crash". There will be TV shows like "broke and busted" telling people how to get along with no money and in total debt.

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Dot Com boom - relapse late 1999, spring boom then utter collapse.

Markets driven to an extreme have a way of extracting maximum money from participants. Think we are seeing the same. When you look at the level of TV/paper exposure and the levels of risk money - high leverage, 100%+ leverage the housing market makes the stock market bubble look like a pin ***** in both raw financial terms and mania terms.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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